- It takes sup
erior information to earn a superior return. Most people don’t have superior information or any way of getting it − they only think they do. Overconfidence is reinforced when an investor makes money. However, guessing correctly does not mean you’re informed, smart or skilled because every investment will either go up or down after you buy it.
- Bet on alpha with BINGO money, not serious money. “Use BINGO money to gamble with, not house money,” my Grandma Ferri used to say. Only bet what you can afford to lose. Grandma’s BINGO money was the loose change she found in my grandfather’s overalls. I wrote about the difference in my first book, Serious Money; Straight Talk About Investing for Retirement. You can download the book for free on my website.
When building a prudent portfolio, seeking alpha should not be part of the decision. Prudent investors should be most concerned with how assets are allocated in their portfolio. This strategy will result in superior results.
Please comment or call to discuss how this affects you and your investments.